Payment of Dividends to Shareholders of Belarusian Subsidiaries from Unfriendly States

Payment of Dividends to Shareholders of Belarusian Subsidiaries from Unfriendly States

In 2026, relations between Belarus and the European Union continue to develop against the backdrop of restrictive measures and a special regulatory regime. This directly affects business, in particular the making of payments to foreign shareholders of Belarusian companies.

Payment of dividends to shareholders of Belarusian subsidiaries from “unfriendly states” involves more than compliance with standard corporate procedures. Companies must also take into account the permit requirements currently in force and the tax consequences.

This article examines the key legal aspects of paying dividends to shareholders of Belarusian companies from “unfriendly states” and analyses the relevant procedure in light of the current corporate, regulatory and tax requirements.

I. General Procedure for Distribution and Payment of Dividends

Under ordinary circumstances, payment of dividends to a foreign shareholder of a Belarusian legal entity does not require any special corporate procedure. Regardless of the shareholder’s citizenship or place of registration, a Belarusian legal entity must first comply with the general requirements of the corporate legislation of the Republic of Belarus governing the formation and distribution of dividends.

The principal rules in this area are set out in the Law of the Republic of Belarus No. 2020-XII of 9 December 1992 “On Business Entities” (“Law No. 2020-XII”). The Law applies to legal entities established and operating in the Republic of Belarus, including companies with foreign participation.

Under Belarusian legislation, the conditions and procedure for distribution of the company’s profit and losses are determined by its articles of association. At the same time, the decision on distribution of profit and losses falls within the exclusive competence of the general meeting of shareholders of the company. In other words, the mere fact that a Belarusian subsidiary has earned profit does not give its shareholder an automatic right to the corresponding amount: a formal corporate decision on distribution of profit must first be adopted. As a rule, a general meeting is quorate if shareholders holding more than 50% of the total number of votes participate in it. If the required quorum is not reached, a repeat general meeting may be held; it is quorate if shareholders holding more than 30% of the total number of votes participate, unless the articles of association provide for a higher threshold.

Thus, the standard process is relatively simple: the company earns profit, the general meeting of shareholders adopts a decision on its distribution, and the company then pays the relevant amount in the manner and within the time limits determined by the articles of association or by the decision of the general meeting. If the time limits are set neither by the articles of association nor by the decision of the general meeting, the time limits provided by legislation apply: 60 days from the date on which the general meeting of shareholders adopts the decision on distribution and payment of dividends in a limited liability company, and likewise 60 days from the date of adoption of such decision for holders of ordinary shares in a joint-stock company.

For a Belarusian company with a foreign shareholder, the basic corporate procedure generally remains unchanged. However, payment of dividends to shareholders from states committing actions unfriendly towards the Republic of Belarus is subject to additional special restrictive measures. Accordingly, in such cases the standard corporate requirements are supplemented by special conditions that must be met. The basic principles of these conditions are set out in the Law of the Republic of Belarus No. 280-Z of 12 July 2023 “On the Application of Special Restrictive Measures” (“Law No. 280-Z”).

It should be noted that the legislation of the Republic of Belarus contains a list of foreign states committing actions unfriendly towards the Republic of Belarus. The list includes the member states of the European Union, as well as Australia, Canada, Liechtenstein, Norway, New Zealand, Albania, Iceland, North Macedonia, the United Kingdom of Great Britain and Northern Ireland, the United States of America, Montenegro and Switzerland.

Whether a person belongs to the category of persons from “unfriendly states” is determined on the basis of criteria established by law. Such persons include foreign persons connected with “unfriendly states”, including citizens and organisations of such states, as well as persons under their control. In particular, such a connection is determined by the person’s citizenship, place of registration, the place where it predominantly conducts business activity, or the place where it predominantly derives profit from such activity. Persons controlled by the said foreign citizens or organisations fall into this category irrespective of their place of registration or place of predominant conduct of business activity.

The special restrictive measures provided for by Law No. 280-Z may include prohibitions or restrictions on financial operations. Decisions to introduce such measures are adopted by the Council of Ministers of the Republic of Belarus in the form of resolutions.

On the basis of this legal framework, a special regime directly regulating the payment of profit and dividends to foreign shareholders was introduced in 2024. Resolution of the Council of Ministers of the Republic of Belarus No. 299 of 19 April 2024 “On the Application of a Special Restrictive Measure” (“Resolution No. 299”) introduced a restriction on payment of distributed (accrued) profit and/or dividends to foreign shareholders and owners of property of Belarusian legal entities who are persons from “unfriendly states”.

Taking into account the amendments made in 2025, the permit regime has been extended until 31 December 2026, and a permit is required regardless of the amount being paid.

Thus, a corporate decision on distribution of dividends is not sufficient for their actual payment to a foreign shareholder from an “unfriendly state”. To make such a payment, the Belarusian company must obtain the relevant permit from the regional (Minsk City) executive committee.

II. Special Rules for Payment of Dividends to Shareholders from “Unfriendly States”

The introduction of the special restrictive measure does not mean a complete prohibition on payment of dividends to foreign shareholders from “unfriendly states”. Instead, the legislation permits such payments subject to obtaining a permit from the relevant regional (Minsk City) executive committee.

Accordingly, the corporate process does not end with the adoption by the general meeting of shareholders of a decision on distribution of profit. After determining the amount of dividends and adopting the relevant corporate decision, the company must also assess whether it meets the requirements for obtaining the permit.

It should be noted that at present the permit of the executive committee is required regardless of the amount of dividends paid, although until July 2025 approval was not required if the total annual amount of dividends did not exceed 80,000 base values (approximately EUR 1.02 million).

The legislation provides for two separate sets of criteria that a Belarusian legal entity must meet in order to obtain a permit for payment of dividends. The applicable set of criteria depends on the aggregate amount of profit and/or dividends payable to foreign shareholders during the relevant calendar year.

1. Eligibility Criteria for Obtaining a Permit for Payment of Dividends

i) Permit for payment of dividends in an amount not exceeding 20,000 base values

If the aggregate amount of dividends payable to all foreign shareholders during a calendar year does not exceed 20,000 base values (approximately EUR 254,360.00), the Belarusian company must meet all of the following requirements in order to obtain a permit:

• the average headcount of the resident’s employees for the reporting period of the current year must be at least 70% of the corresponding figure for the same period of the previous year;

• as of the date of application for the permit, or as of the last reporting date or the date on which the credit report was generated, the resident must have no unperformed obligations in respect of:

– overdue debt on principal or interest under loans granted by Belarusian banks or OJSC “Development Bank of the Republic of Belarus”;

– taxes, levies (duties), penalties and other mandatory payments to the budget; payments to the budget of the State Social Protection Fund of the Republic of Belarus; budget loans and borrowings granted from the republican budget; obligations under guarantees provided by the Council of Ministers; budget loans and borrowings granted from local budgets; and obligations under guarantees provided by local executive committees;

– enforcement proceedings pending before the relevant enforcement authorities;

– wages and other payments to employees due under labour and state social insurance legislation;

• there must be no information from state bodies or their territorial bodies or subdivisions indicating the existence of grounds precluding the issuance of the permit.

ii) Permit for payment of dividends in an amount exceeding 20,000 base values

If the aggregate amount of dividends payable to all foreign shareholders during a calendar year exceeds 20,000 base values (approximately EUR 254,360.00), the resident must meet a broader set of criteria. In addition to the requirements applicable to payments of up to 20,000 base values, the following additional requirements must be met:

• the aggregate amount of dividends for which an application has been filed and which have already been paid during the current calendar year must not exceed 50% of the average amount of net direct foreign investment for the five years preceding the year of payment of the dividends. For these purposes, amounts of debt owed to the direct investor for goods, works and services are excluded from the calculation of direct foreign investment.

• A special calculation method applies to residents that have been in operation for less than five years. In that case, the average amount of net direct foreign investment for the entire period of the resident’s operation is taken into account. A similar approach applies if the foreign shareholder has held a stake in the resident for less than five years; in that case, the calculation is made on the basis of the average amount of direct foreign investment for the entire period of ownership.

It should also be noted that this requirement may not apply to residents of the High-Tech Park of Belarus, provided that the nominal average monthly salary, calculated for the previous year and the reporting period of the current year, is at least 11.5 times the minimum wage established as of 1 January of the current year.

• the resident must not have a net loss for the previous year or for the reporting period of the current year;

• the nominal average monthly salary accrued by the resident for the previous year and the reporting period of the current year must be at least 3.5 times the minimum wage established by the Government as of 1 January of the current year. For residents of the High-Tech Park, a higher threshold applies, equal to 11.5 times the minimum wage. For such residents, this salary criterion applies in cases where the above-described criterion relating to the amount of direct foreign investment does not apply.

Thus, the larger the dividend payment to a foreign shareholder, the broader the assessment of the Belarusian company’s activities. For relatively small payments, the key considerations are, first of all, the preservation of employment and the absence of certain types of unperformed obligations. For larger payments, the legislation additionally takes into account the company’s position in terms of foreign investment, financial results and salary levels.

2. Procedure for Obtaining a Permit for Payment of Dividends

The permit is obtained not by the foreign shareholder but by the Belarusian legal entity paying the dividends. To obtain the permit, the resident must submit an application to the relevant regional (Minsk City) executive committee at the place of its state registration. The application is submitted in two copies in the prescribed form. It must also be accompanied by the resident’s consent to disclosure of its credit report, which is required to verify compliance with the relevant criterion.

In practice, this means that before filing the application the company should carry out an internal assessment of its compliance with the applicable requirements. An incorrect assessment of unperformed obligations, headcount, financial indicators or the amount of dividends already paid may lead to a refusal to issue the permit and, as a consequence, to a delay in payment to the foreign shareholder.

The application review period is 30 days. At the same time, the executive committee is not limited to the documents and information submitted by the applicant. In the course of the review, it conducts an interagency verification of the information stated in the application. The executive committee sends requests to the relevant state bodies, which verify matters within their competence. A separate procedure applies for verification of credit debt: the executive committee requests the resident’s credit report from the National Bank of the Republic of Belarus on the basis of the company’s consent to disclosure of the report.

Following the review, the executive committee adopts one of two decisions: either to grant the permit for payment of dividends or to refuse to issue the permit.

The permit is issued provided that the information submitted by the applicant is accurate and the company meets the applicable criteria. If any of the required conditions is not met, the executive committee will refuse to issue the permit. However, a refusal does not deprive the company of the right to apply again. After eliminating the circumstances that gave rise to the refusal or to the return of the application, the resident may submit a new application to the relevant executive committee. The legislation does not establish any limit on the number of repeat applications.

3. What Happens to Dividends if the Permit Is Not Obtained?

A separate issue arises where a corporate decision to pay dividends has already been adopted but the required permit cannot be obtained. In such circumstances, the funds intended for payment to the foreign shareholder must be credited to a current (settlement) bank account with a special mode of operation.

The funds retain their designated purpose and may be used by the foreign shareholder only in the manner established by the special regulation.

In particular, funds credited to the foreign shareholder’s special account may be used to finance investment projects in the Republic of Belarus, to repay certain types of loan debt, to purchase government securities of the Republic of Belarus, or to place the funds in irrevocable bank deposits for a term of at least one year with the bank in which the special account is maintained. The legislation also permits the use of such funds for other purposes agreed by the Council of Ministers of the Republic of Belarus with the President of the Republic of Belarus.

Accordingly, in the event of a refusal to grant the permit, the economic result for the foreign shareholder differs significantly from an ordinary dividend payment. The shareholder does not obtain unrestricted access to the amount due to it; instead, any further use of these funds is subject to a special regime established by the state.

As a result, a special regulatory model has taken shape. On the one hand, Belarusian corporate law continues to recognise the shareholder’s right to receive distributed profit, subject to compliance with the applicable conditions. On the other hand, the exercise of this right by shareholders from “unfriendly states” is subject to an additional permit procedure.

For Belarusian subsidiaries of European corporate groups, this creates an additional consideration, relating not only to whether it is possible to distribute profit but also to whether it is commercially expedient to distribute it at all. If the company cannot freely transfer profit to its parent company, it must decide whether to seek the required permit or instead to retain the profit in Belarus and use it for its operations in Belarus.

III. Tax Aspects of Payment of Dividends

Obtaining a permit for payment of dividends resolves only one of the issues facing a Belarusian subsidiary. The next issue is taxation. Even if all applicable corporate procedures have been complied with and the necessary permit has been obtained, a Belarusian company paying dividends to a foreign shareholder must comply with the rules on taxation of income of foreign organisations and perform the duties of a tax agent.

Income of foreign organisations from sources in Belarus that do not carry out activities in Belarus through a permanent establishment is subject to Belarusian withholding tax at source. In this case, the Belarusian company, as the source of the income, is responsible for calculating, withholding and remitting the tax. Dividends are among the types of income subject to taxation under the Tax Code of the Republic of Belarus.

In payments to foreign shareholders, particular attention should be paid to changes in the tax regime applicable to relations between Belarus and “unfriendly states”. Previously, the provisions of double taxation avoidance agreements concluded between the Republic of Belarus and foreign states could apply to dividend payments. However, in view of the situation that has arisen between the Republic of Belarus and a number of other countries recognized as unfriendly, the performance of such agreements between Belarus and certain “unfriendly states” has been suspended.

From 1 June 2024, on the basis of Resolution of the Council of Ministers No. 164 of 7 March 2024 (“Resolution No. 164”), Belarus suspended the performance of certain provisions of the relevant double taxation avoidance agreements governing, among other things, the taxation of dividends, in respect of states included in the list of unfriendly states.

Against this background, a special tax regime established by Belarusian legislation applies. From 1 April 2024 to 31 December 2026 inclusive, dividends accrued to foreign organisations located in a state included in the list of unfriendly states are subject to income tax at a rate of 25%.

As a result, taxation is another important element of the dividend payment process. Whereas previously the tax consequences of paying dividends could be assessed largely on the basis of whether a reduced rate under an applicable double taxation avoidance agreement was available, payments to shareholders from “unfriendly states” must now be considered in light of the special regime established by Belarusian legislation.
IV. Conclusion

Payment of dividends to foreign shareholders of a Belarusian subsidiary from “unfriendly states” has become a multi-layered process under the current regulation. In addition to the standard corporate requirements for distribution of profit, payments to shareholders from “unfriendly states” are subject to a special permit procedure. The tax regime has also changed significantly owing to the suspension of the performance of certain provisions of bilateral double taxation avoidance agreements.

At the same time, it would be incorrect to characterise the current regime as a complete prohibition on payment of dividends to foreign shareholders. The applicable rules still permit such payments, provided that the relevant requirements are met and the necessary permit is obtained.

Therefore, for legal entities the key question is not whether dividends can be paid at all, but how to structure the payment process so as to ensure compliance with the applicable corporate, permit and tax requirements.

In practice, this requires the company to assess in advance whether it meets the criteria for obtaining the permit, to determine the amount of the proposed dividends and their tax consequences, and to verify compliance with the applicable corporate procedures for distribution of profit before transferring funds to the foreign shareholder.